"As the saying goes, the only sure things in life are death and taxes. This saying points out the result that everything having to do with taxes is an automatic fiscal policy." Is the preceding analysis correct or incorrect? Explain your answer
What will be an ideal response?
The analysis is incorrect because whenever Congress changes the tax law, it is a discretionary fiscal policy. For instance, if Congress passes a tax cut, the change in taxes is a discretionary fiscal policy. However, for any given set of tax laws, a change in the state of the economy will automatically change the tax revenues and so for a given set of tax laws, tax revenue do operate as an automatic fiscal policy.
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MC increases because
A) MC naturally increases as the firm nears capacity. B) labor is paid overtime wages when volume increases. C) in the short run, MC always increases. D) the law of diminishing returns takes effect.
An oligopoly market is:
A. a market with many sellers. B. a market with a single seller. C. a market with a few sellers. D. a market with many buyers.
To test the null hypothesis of a unit root, the ADF test
A) has higher power than the so-called DF-GLS test. B) uses complicated interative techniques. C) cannot be calculated if the variable is integrated of order two or higher. D) uses a t-statistic and a special critical value.
Which of the following would be considered a leading indicator?
a. Prime interest rate b. Personal income c. Money supply d. Inventories to sales ratio e. Unemployment duration